Companies - Close Companies (Ss 248-276)

Link to law: http://www.elaws.gov.bw/desplaylrpage1.php?id=1317

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[Ch4201s248]248. Formation of close company

(1)

Anyone or more persons, but not exceeding five, who qualify for membership of a

close company in terms of this Act, may form a close company by making

application under subsection (3)(a).

(2)

Any private company having not more than five shareholders, in this Part called

"members", who qualify under section 249 for membership of a close

company, may apply to the Registrar for the private company to be converted

into a close company by making application under section 278.

(3)

The application under subsection (1) for registration as a close company shall

be made by application for registration under section 21 signed by all of the

applicants.

(4)

The application shall state in addition to the matters referred to in section

21-

(a) the size, expressed as a percentage of each

member’s interest in the company;

(b) particulars of the contribution of each

member in accordance with section 250 including-

(i) any amounts of money, and

(ii) a description and statement of the fair

value of any property (whether corporeal or incorporeal) or any service

referred to in section 250(1).

(c) the name and address of the person or firm

which has consented in writing to be appointed as accounting officer of the

close company pursuant to section 273.

(5)

The application shall provide for the designation "CC" to be added to

the name of the close company.

(6)

The Registrar on being satisfied that the company is entitled to be registered

as a close company shall enter the company on the register of close companies

and the company shall thereupon be a close company under this Act.

(7)

In this Part, unless the context otherwise requires-

"property"

includes corporeal or incorporeal property;

[Ch4201s249]249. Qualification for membership of and nature of

business of a close company

(1)

Subject to subsection (2) only individuals may be members of a close company

and no corporate body or trustee in that capacity shall directly or indirectly

(whether through the instrumentality of a nominee or otherwise) hold a member’s

interest in a close company.

(2)

In the case of a member who becomes insolvent, deceased or mentally disordered

or is otherwise incapable or incompetent to manage his affairs that member’s

interest may be held by the trustee, administrator, executor or curator or

other legal personal representative of the member.

(3) A

close company may not be established for or carry on the business of banking,

or insurance but may otherwise be formed for and carry on any lawful business.

(4)

The provisions of this Act, with the exception of the Tenth Schedule, shall

apply mutatis mutandis to a close company, and references to

shareholders shall be read as referring to members and references to directors

or to the board read as referring to members collectively.

[Ch4201s250]250. Contributions by members

(1)

Every person who is to become a member of a close company upon its

registration, shall make to the company an initial contribution of money,

property, or services rendered in connection with and for the purposes of the

formation and incorporation of the company, and particulars of such

contribution shall be stated in the application for incorporation referred to

in section 248(4).

(2)

The amount or value of the members’ contributions, or of the contribution of

any one or more members, may from time to time by agreement among all the

members-

(a) be increased by additional contributions of

money or property to the close company by existing members or, in terms of

section 255 (1)(b), by a person becoming a member of a registered

corporation; or

(b) be reduced, provided that a reduction by

way of a repayment to any member shall comply with the provisions of section

258 and 259.

(3)

Particulars of any increase or reduction of a member’s contribution in terms of

subsection (2) shall be notified to the Registrar under section 261.

(4)

Money or property referred to in subsection (1) or (2)(a) shall, in

order to vest ownership thereof in the close company, be paid, delivered or

transferred, as the case may be, to the company within a period of 90 days-

(a) after the date of registration of the

company, in the case of an initial contribution referred to in subsection (1);

or

(b) after the date of the registration of any

notice of additional contribution referred to in section 261.

(5)

An undertaking by a member to make an initial or an additional contribution to

a corporation shall be enforceable by the close company in legal proceedings.

[Ch4201s251]251. Postal address and registered office

(1)

Every close company shall have in Botswana a postal address and an office to

which, subject to subsection (2), all communications and notices to the company

may be addressed.

(2)

Any-

(a) notice, order, communication or other

document which is in terms of this Act required or permitted to be served upon

any company or member thereof, shall be deemed to have been served if it has

been delivered at the registered office, or has been sent by certified or

registered post to the registered office or postal address, of the company; and

(b) process which is required to be served upon

any corporation or member thereof shall, subject to applicable provisions in

respect of such service in any law, be served by so delivering or sending it.

[Ch4201s252]252. Deregistration

(1)

If the Registrar has reasonable cause to believe that a close company is not

carrying on business or is not in operation, he shall serve on the company at

its postal address a letter by certified post in which the company is notified

thereof and informed that if the Registrar is not within 60 days from the date

of his letter informed in writing that the company is carrying on business or

is in operation, the company will, unless good cause is shown to the contrary,

be deregistered.

(2)

After the expiration of the period of 60 days mentioned in a letter referred to

in subsection (1), or upon receipt from the company of a written statement

signed by or on behalf of every member to the effect that the company has

ceased to carry on business and has no assets or liabilities, the Registrar

may, unless good cause to the contrary has been shown by the company,

deregister that company.

(3)

Where a company has been deregistered, the Registrar shall give notice to that

effect in the Gazette, and the date of the publication of such notice

shall be deemed to be the date of deregistration.

(4)

The deregistration of a close company shall not affect any liability of a

member of the close company to the company or to any other person, and such

liability may be enforced as if the company were not deregistered.

(5)

If a company is deregistered while having outstanding liabilities, the persons

who are members of such company at the time of de-registration shall be jointly

and severally liable for such liabilities.

(6)

The Registrar may on application by any interested person, if he is satisfied

that a company was at the time of its deregistration carrying on business or

was in operation, or that it is otherwise just that the registration of the

company be restored, restore the said registration.

(7)

The Registrar shall give notice of the restoration of the registration of a

company in the Gazette, and as from the date of such notice the company

shall continue to exist and be deemed to have continued in existence as from

the date of re-registration as if it were not deregistered.

[Ch4201s253]253. Nature of member’s interest

(1)

The interest of any member in a close company shall be a single interest

expressed as a percentage and shall be moveable property which shall be

transferable in the manner provided by this Act.

(2)

Two or more persons shall not be joint holders of the same member’s interest in

a close company.

[Ch4201s254]254. Representation of members

(1) A

minor who is a member of a close company, other than a minor over the age of 18

years whose guardian has lodged with the company a written consent to the

minor’s participation in the company, shall be represented in the close company

by his guardian.

(2) A

married woman, whether subject to the marital power of her husband or not,

shall require no representation or assistance to act as a member of a close

company.

(3) A

member subject to any other legal disability shall be represented in the close

company by his duly appointed or authorised legal representative referred to in

subsection (2) of section 249.

[Ch4201s255]255. Acquisition of member’s interest by new

member

(1) A

person becoming a member of a close company shall acquire his member’s interest

required for membership-

(a) from one or more of the existing members or

his or their deceased or insolvent estates; and

(b) pursuant to a contribution made by such

person to the close company, in which case the percentage of his member’s

interest is determined by agreement between him and the existing members, and

the percentages of the interests of the existing members in the close company

shall be reduced in accordance with the provisions of section 258.

(2)

The contribution referred to in subsection (1)(b) may consist of an

amount of money, or of any property of a value agreed upon by the person

concerned and the existing members.

[Ch4201s256]256. Disposal of interest of insolvent member

(1)

Notwithstanding any provision to the contrary in the constitution or other

agreement between members, a trustee of the insolvent estate of a member of a

close company may, in the discharge of his duties, sell that member’s interest-

(a) to the close company if there are one or

more members other than the insolvent member;

(b) to the members of the close company other

than the insolvent member, in proportion to their member’s interests or as they

may otherwise agree upon; or

(c) subject to the provisions of subsection (2),

to any other person who qualifies for membership of a close company in terms of

section 249.

(2)

If the close company concerned has one or more members other than the

insolvent, the following provisions shall apply to a sale in terms of

subsection (1)(c) of the insolvent member’s interest-

(a) the trustee shall deliver to the close

company a written statement giving particulars of the name and address of the

proposed purchaser, the purchase price and the time and manner of payment

thereof;

(b) for a period of 28 days after the receipt

by the close company of the written statement the close company or the members,

in such proportions as they may agree upon, shall have the right, exercisable

by written notice to the trustee, to be substituted as purchasers of the whole,

and not a part only, of the insolvent member’s interest at the price and on the

terms set out in the trustee’s written statement; and

(c) if the insolvent member’s interest is not

purchased in terms of paragraph (b), the sale referred to in the

trustee’s written statement shall become effective and be implemented.

(3)

The provisions of this section shall apply mutatis mutandis to any

attachment and sale in execution of a member’s interest in a close company.

[Ch4201s257]257. Disposal of interest of deceased member

Subject

to any other arrangement in the constitution an executor of the estate of a

member of a close company who is deceased shall, in the performance of his

duties-

(a) cause the deceased member’s interest in the

close company to be transferred to a person who qualifies for membership of a

close company in terms of section 249 and is entitled thereto as legatee or

heir or under a redistribution agreement, if the remaining member or members of

the close company (if any) consent to the transfer of the member’s interest to

such person; or

(b) if any consent referred to in paragraph (a)

is not given within 28 days after it was requested by the executor, sell the

deceased member’s interest-

(i) to the close company, if there is any

other member or members than the deceased member,

(ii) to any other remaining member or members

of the close company in proportion to the interests of those members in the

close company or as they may otherwise agree upon, or

(iii) to any other person who qualifies for

membership of a close company in terms of section 249, in which case the

provisions of subsection (2) of section 256 shall mutatis mutandis apply

in respect of any such sale.

[Ch4201s258]258. Maintenance of aggregate of members’ interest

The

aggregate of the members’ interests in a close company expressed as a

percentage shall at all times be one hundred per cent, and for that purpose-

(a) any transfer of the whole, or a portion, of

a member’s interest shall be effected by the cancellation or the reduction, as

the case may be, of the interest of the member concerned and the allocation in

the name of the transferee, if not already a member, of a member’s interest of

the percentage concerned, or the addition to the interest of an existing member

of the percentage concerned;

(b) when a person becomes a member of a close

company pursuant to a contribution made by him to the company, the percentage

of his member’s interest shall be agreed upon by him or her and the existing

members, and the percentages of the interests of the existing members shall be

reduced proportionally or as they may otherwise agree; and

(c) any member’s interest acquired by the close

company shall be added to the respective interests of the other members in

proportion to their existing interests or as they may otherwise agree.

[Ch4201s259]259. Payment by close company for members’

interest acquired

(1)

Payment by a close company in respect of its acquisition of a member’s interest

in the company shall be made only-

(a) with the previously obtained written

consent of every member of the company, other than the member whose interest is

acquired, for the specific payment;

(b) if, after such payment is made, the

company’s assets, fairly valued, exceed all its liabilities;

(c) if the company is able to pay its debts as

they become due in the ordinary course of its business; and

(d) if such payment will in the particular

circumstances not in fact render the company unable to pay its debts as they

become due in the ordinary course of its business.

(2)

For the purposes of subsection (1) "payment" shall include the

delivery or transfer of any property.

[Ch4201s260]260. Financial assistance by close company in

respect of acquisition of members’ interest

A

close company may give financial assistance (whether directly or indirectly and

whether by means of a loan, guarantee, the provision of security or otherwise)

for the purpose of, or in connection with, any acquisition of a member’s

interest in that company by any person, only-

(a) with the previously obtained written

consent of every member of the company for the specific assistance;

(b) if, after such assistance is given, the

company’s assets, fairly valued, exceed all its liabilities;

(c) if the company is able to pay its debts as

they become due in the ordinary course of its business; and

(d) if such assistance will in the particular

circumstances not in fact render the company unable to pay its debts as they

become due in the ordinary course of its business.

[Ch4201s261]261. Registration of changes

(1)

Whenever any change has been made or has occurred in any of the following

particulars the members of a close company shall within 30 days give notice in

writing containing particulars of the change to the Registrar-

(a) the constitution;

(b) the registered office;

(c) the names and addresses of each member;

(d) the name and address of any person who

becomes a member and of the size expressed as a percentage of that person’s

interest as a member;

(e) the name of any person ceasing to be a

member;

(f) the name and address of the accounting

officer;

(g) the name of the close company;

(h) the financial year;

(i) the making of any additional contribution

to the close company by a member or the reduction in any contribution; and

(j) the change in the percentage of a member’s

interest in the close company.

(2)

If the members of a close company fail to comply with any of the requirements

of subsection (1) each member shall be guilty of an offence and liable to the

penalty set out in section 492(1).

[Ch4201s262]262. Management

(1) A

close company shall -

(a) have no directors or a board and Part X,

other than section 160, shall not apply to a close company; and

(b) convert to a private company under section

279 should it desire to have directors.

(2)

The management of a close company shall be vested in its members which, unless

otherwise provided in its constitution, shall be in proportion to the

percentage of their respective interests in the close company, as adjusted from

time to time to properly reflect any additional contributions or reduction of

interest by the members.

(3)

The members of a close company may delegate the management of the company to a

manager or managers who shall be appointed by unanimous agreement of the

members on the terms and conditions provided for in that agreement or in

accordance with such procedure and on such terms and conditions as is provided

in the constitution.

(4)

Subject to subsection (5), every member of a close company shall, in relation

to a person who is dealing with the company and is not a member, be an agent of

the company.

(5) A

close company shall be bound by any act of a member or manager of the close

company, whether or not such act is performed for the carrying out of the

business of the company, unless the member or manager so acting has in fact no

authority to act for the company in the particular matter and the person with

whom the member or manager dealt, has or ought reasonably to have, knowledge of

the fact that the member or manager has no such authority.

[Ch4201s263]263. Meetings

A close

company may make the decisions and take any steps which are required by this

Act to be made by ordinary or special resolution in any of the following ways-

(a) by an ordinary or special resolution at a

meeting of members called and conducted in the way required by the Act or the

constitution of the company;

(b) by a resolution in lieu of meeting; or

(c) in relation to any matters which can be

entered into or done by way of unanimous agreement under section 247 then by

way of such unanimous agreement.

[Ch4201s264]264. Fiduciary position of members

(1)

Each member of a close company stands in a fiduciary relationship towards the

company and his fellow members.

(2)

Without prejudice to the generality of subsection (1) of this section -

(a) every member of a close company is bound to

render to every other member full information on all things affecting the

company;

(b) every member of a close company shall

account to the company for any benefit derived by him without the consent of the

other members from any transaction concerning the company or from any use by

him of the company’s property, name or business connection; and

(c) if a member of a close company, without the

consent of the other members, directly or indirectly carries on any business of

the same nature as, and competing with, that of the company, he shall account

for and pay over to the company all profits made by him in that business.

(2) A

close company need not keep an Interests Register.

[Ch4201s265]265. Payments by close company to members

(1)

Any payment by a close company to any member by reason only of his membership,

may be made only-

(a) if, after such payment is made, the

company’s assets, fairly valued, exceed all its liabilities;

(b) if the company is able to pay its debts as

they become due in the ordinary course of its business; and

(c) if such payment will in the particular

circumstances not in fact render the company unable to pay its debts as they

become due in the ordinary course of its business.

(2) A

member shall be liable to a close company for any payment received contrary to

any provision of subsection (1).

(3)

For the purposes of this section-

(a) without prejudice to the generality of the

expression "payment by a close company to any member by reason only of his

membership", that expression-

(i) shall include a distribution, or a

repayment of any contribution, or part thereof, to a member, but

(ii) shall exclude any payment to a member in

his capacity as a creditor of the relevant close company and, in particular, a

payment as remuneration for services rendered as an employee or officer of the

company, a repayment of a loan or of interest thereon or a payment of rental;

and

(b)

"payment" shall include the delivery or transfer of any property.

[Ch4201s266]266. Prohibition of loans and furnishing of

security to members and others by close company

(1) A

close company shall not, directly or indirectly, make a loan -

(a) to any of its members;

(b) to any other company in which one or more

of its members together hold more than a 50 per cent interest; or

(c) to any other company (except a close

company) controlled by one or more members of the close company,

and shall not provide any security to any person in connection with any

obligation of any such member, or other close company, or other company.

(2)

The provisions of subsection (1) shall not apply in respect of the making of

any particular loan or the provision of any particular security with the

express previously obtained consent in writing of all the members of a close

company.

(3)

Any member of a close company who authorises or permits or is a party to the

making of any loan or the provision of any security contrary to any provision of

this section-

(a) shall be liable to indemnify the close

company and any other person who had no actual knowledge of the contravention

against any loss directly resulting from the invalidity of such loan or

security; and

(b) shall be guilty of an offence and shall be

liable on conviction to the penalty set out in section 492(2).

(4) A

company shall be treated for the purposes of subsection (1)(c) as being

controlled by one or more members of a close company if the same factors are

present as would result in a company being controlled by another company under

section 7.

(5)

In this section the term-

(a) "loan" includes-

(i) a loan of any property, and

(ii) any credit extended by a close company

where the debt concerned is not payable or is not being paid in accordance with

normal business practice in respect of the payment of debts of the same kind;

and

(b) "security" includes a guarantee.

[Ch4201s267]267. Liability of members for negligence

(1) A

member of a close company shall be liable to the company for loss caused by his

failure in the carrying out of the business of the company to act with the

degree of care and skill that may reasonably be expected from a person of his

knowledge and experience.

(2)

Liability referred to in subsection (1) shall not be incurred if the relevant

conduct was preceded or followed by the written approval of all the members

where such members had or have knowledge of all the material facts.

[Ch4201s268]268. Rules applying to internal relations in the

absence of contrary agreement

The

following rules shall apply to the relations between members of a close company

insofar as this Act or the constitution in respect of the close company does

not provide otherwise-

(a) every member shall be entitled to

participate in the carrying on of the business of the company;

(b) subject to the provision of section 262 and

of paragraph (d), members shall have the right to participate in the

management of the business of the company and in regard to the power to

represent the company in the carrying on of its business:

Provided that

the consent in writing of a member holding a member’s interest of at least 75

per cent, or of members holding together at least that percentage of the

member’s interests, in the company, shall be required for -

(i) a change in the principal business

carried on by the company,

(ii) a disposal of the whole, or substantially

the whole, undertaking of the company,

(iii) a disposal of all, or the greater portion

of, the assets of the company, and

(iv) any acquisition or disposal of immovable

property by the company;

(c) differences between members as to matters

connected with a close company’s business shall be decided by majority vote at

a meeting of members of the company;

(d) at any meeting of members of a close

company each member shall have the number of votes that corresponds with the

percentage of his interest in the close company;

(e) all the members are entitled to share in

the capital and profits of the close company in proportion to their respective

interests in the company;

(f) a close company shall indemnify every

member in respect of expenditure incurred or to be incurred by him-

(i) in the ordinary and proper conduct of the

business of the company, and

(ii) in regard to anything done or to be done

for the preservation of the business or property of the company; and

(g) distributions by a close company to its

members by reason only of their membership in terms of section 265 shall be of

such amounts and be effected at such times as the members may from time to time

agree upon, and such payments shall be made to members in proportion to their

respective interests in the company.

[Ch4201s269]269. Disqualification of persons regarding

management of close company

(1)

Notwithstanding any other provision of this Act or the constitution of a close

company, the following persons shall be disqualified from taking part in the

management of a close company-

(a) any person under legal disability, except-

(i) a married woman, whether subject to the

marital power of her husband or not who shall be able to exercise full membership

rights in the same manner as any other member, and

(ii) a minor who has attained at least the age

of 18 years and whose guardian has lodged with the company a written consent to

the minor’s participation in the management of the business of the company;

(b) save under authority of a court-

(i) an un-rehabilitated insolvent,

(ii) any person removed from an office of

trust on account of misconduct, and

(iii) any person who has at any time been

convicted of theft, fraud, forgery or uttering a forged document, perjury, or

any offence involving dishonesty or in connection with the formation or

management of a company, and has been sentenced in relation to such conviction

to imprisonment for at least six months without the option of a fine; and

(c) any person who is subject to any order of a

court under this Act or the repealed Act disqualifying him from being a

director of a company.

(2)

Any person disqualified under the provisions of subsection (1)(b) or (c)

who directly or indirectly takes part in or is concerned with the management of

any close company, shall be guilty of an offence and shall be liable on

conviction to the penalty set out in section 492(2).

[Ch4201s270]270. Accounting records

(1) A

close company shall keep in the English language such accounting records as are

necessary fairly to present the state of affairs and business of the company,

and to explain the transactions and financial position of the business of the

company, including-

(a) records showing its assets and liabilities,

members’ contributions, undrawn profits, revaluations of fixed assets and

amounts of loans to and from members;

(b) a register of fixed assets showing in

respect thereof the respective dates of any acquisition and the cost thereof,

depreciation (if any), and where any assets have been revalued, the date of the

revaluation and the revalued amount thereof, the respective dates of any

disposals and the consideration received in respect thereof:

Provided that

in the case of a close company which has been converted from a private company,

the existing fixed asset register of the company shall be deemed to be such a

register in respect of the close company, and such particulars therein shall be

deemed to apply in respect of it;

(c) records containing entries from day to day

of all cash received and paid out, in sufficient detail to enable the nature of

the transactions and, except in the case of cash sales, the names of the

parties to the transactions to be identified;

(d) records of all goods purchased and sold on

credit, and services received and rendered on credit, in sufficient detail to

enable the nature of those goods or services and the parties to the

transactions to be identified;

(e) statements of the annual stocktaking, and

records to enable the value of stock at the end of the financial year to be

determined; and

(f) vouchers supporting entries in the

accounting records.

(2)

The accounting records relating to-

(a) contributions by members;

(b) loans to and from members; and

(c) payments to members, shall contain

sufficient detail of individual transactions to enable the nature and purpose

thereof to be clearly identified.

(3)

The accounting records referred to in subsection (1) shall be kept in such a

manner as to provide adequate precautions against falsification and to

facilitate the discovery of any falsification.

(4)

The accounting records shall be kept at the place or places of business or at

the registered office of the close company and shall, wherever kept, be open at

all reasonable times for inspection by any member.

(5)

Any close company which fails to comply with any provision of any of the

preceding subsections of this section, and every member thereof who is a party

to such failure or who fails to take all reasonable steps to secure compliance

by the company with any such provision, shall be guilty of an offence and

liable to the penalty set out in section 492(2).

(6)

In any proceedings against any member of a close company in respect of an

offence consisting of a failure to take reasonable steps to secure compliance

by a close company with any provision referred to in subsection (5), it shall

be a defence if it is proved that-

(a) the accused had reasonable grounds for

believing and did believe that a competent and reliable person was charged with

the duty of seeing that any such provision was complied with;

(b) such person was in a position to discharge

that duty; and

(c) that the accused had no reason to believe

that such person had in any way failed to discharge that duty.

[Ch4201s271]271. Financial year of close company

(1) A

close company shall-

(a) determine a date on which, in each year,

its financial year will end; and

(b) cause the financial year of the company to

be its annual accounting period.

(2)

The date referred to in subsection (1)(a) may, subject to the provisions

of section 261, be changed by the company to any other date:

Provided

that the close company may not change the date referred to in subsection (1)(a)

more than once in any financial year.

(3)

Subject to any increase or reduction of the duration of a financial year by

reason of the provisions of subsection (4), the duration of each financial year

of a close company shall be 12 months ending on the date or other date referred

to in subsection (1)(a) or (2).

(4)

Notwithstanding the provisions of subsection (3)-

(a) the first financial year of a close company

shall commence on the date of its registration and shall end on the date

referred to in subsection (1)(a) occurring not less than three nor more

than 15 months after the date of registration:

Provided that

the first financial year of any close company which has converted from an

existing private company in terms of section 248 shall end on the date on which

the financial year of the private company would have ended had it not been so

converted; and

(b) in the case of a close company which has in

terms of subsection (2) changed the date referred to in subsection (1)(a),

the financial year shall commence at the end of the previous financial year and

shall end on the date as changed occurring not less than three nor more than 18

months after the end of that previous financial year.

[Ch4201s272]272. Annual financial statements

(1)

The members of a close company shall within five months after the end of every

financial year of the company cause annual financial statements in respect of

that financial year to be made out in the English language.

(2)

The annual financial statements of a close company-

(a) shall consist of-

(i) a balance sheet and any notes thereon,

and

(ii) an income statement or any similar

financial statement where such form is appropriate, and any notes thereon;

(b) shall be in conformity with generally

accepted accounting principles, appropriate to the business of the company,

fairly present the state of affairs of the company as at the end of the

financial year concerned, and the results of its operations for that year;

(c) shall disclose separately the aggregate

amounts, as at the end of the financial year, of contributions by members,

undrawn profits, revaluations of fixed assets and amounts of loans to or from

members, and the movements in these amounts during the year;

(d) shall be in agreement with the accounting

records, which shall be summarised in such a form that-

(i) compliance with the provisions of this

subsection is made possible, and

(ii) an accounting officer is enabled to

report to the company in terms of section 276 (1) without it being necessary to

refer to any subsidiary accounting records and vouchers supporting the entries

in the accounting records:

Provided that

nothing contained in this paragraph shall be construed as preventing an

accounting officer, if he deems it necessary, from inspecting such subsidiary

accounting records and vouchers; and

(e) shall contain the report of the accounting

officer referred to in section 276.

(3)

The annual financial statements shall be approved and signed by or on behalf of

a member holding a member’s interest of at least 51 per cent, or members

together holding members’ interests of at least 51 per cent, in the company.

(4) A

close company which in respect of its last preceding financial year satisfies

the criteria referred to in the definition of "exempt private

company" in section 2(4) shall comply with the obligations of an exempt private

company in relation to its financial statements and the provisions relating to

auditors in all respects as if it were a non-exempt private company and

sections 2(4) and 190 to 211 shall apply to such a close company.

(5)

Any member of a close company who fails to take all reasonable steps to comply

or to secure compliance with any provision of this section, shall be guilty of

an offence and liable on conviction to the penalty set out in section 492(2).

(6)

In any proceedings against any member of a close company under subsection (5)

the defence referred to in section 270(6) shall be available to him.

[Ch4201s273]273. Appointment of accounting officers

(1)

Subject to subsection (7) every close company shall appoint an accounting

officer in accordance with the provisions of this Part.

(2)

The appointment of the first accounting officer of a close company shall take

effect on the date of registration of the close company.

(3)

If a vacancy occurs in the office of an accounting officer, whether as a result

of a removal, resignation or otherwise, the close company shall within 28 days

appoint another accounting officer and comply with the provisions of this Part.

(4) A

close company shall inform its accounting officer in writing of his removal

from office.

(5)

An accounting officer shall on resignation or removal from office forthwith

inform every member of the close company thereof in writing, and shall send a

copy of the letter to the last known address of the registered office of the

close company and shall in addition forthwith by certified post inform the

Registrar-

(a) that he has resigned or been removed from

office;

(b) of the date of his resignation or removal

from office;

(c) of the date up to which he performed his

duties; and

(d) whether, at the time of the resignation or

removal from office of the accounting officer, that officer was aware of any

matters in the financial affairs of the close company which are in contravention

of the provisions of this Act, and where that accounting officer was aware of

any such matter shall submit the full particulars thereof in writing to the

Registrar.

(6)

If an accounting officer who has been removed from office is of the opinion

that he was removed for improper reasons, he shall forthwith by certified post

inform the Registrar thereof, and shall send a copy of the letter to every

member.

(7)

Where a close company is receiving accounting advice and assistance, which

includes an equivalent service to that required of an accounting officer under

section 276, through a programme for small business administered or approved by

the Ministry responsible for trade and industry the Registrar shall be given

notice by the Director or officer from the Ministry responsible for providing

the programme of the fact that such assistance is being given and until further

notice is given by such Director or officer to the Registrar that this advice

and assistance has been withdrawn the close company need not appoint an

accounting officer under this section:

Provided

that the provisions of this section shall not apply from after the expiry of

the third financial year of a close company following its incorporation.

[Ch4201s274]274. Qualifications of accounting officers

(1)

Subject to section 273(7), no person shall be appointed as or hold the office

of an accounting officer of a close company, unless that person is a member of

the Botswana Institute of Accountants and is ordinarily resident in Botswana.

(2) A

member or employee of a close company, or a firm whose partner or employee is a

member or employee of a close company, shall not qualify for appointment as an

accounting officer of such company unless all the members consent in writing to

such appointment.

(3) A

firm or corporation may be appointed as an accounting officer of a close

company, provided that-

(a) at least one member of the firm or director

of the corporation is ordinarily resident in Botswana; and

(b) the members of the firm or directors of the

corporation who accept responsibility for the work of the firm or corporation

as accounting officer are qualified to act as accounting officer under

subsection (1).

[Ch4201s275]275. Right of access and remuneration of

accounting officers

(1)

An accounting officer of a close company shall at all times have a right of

access to the accounting records and all the books and documents of the close

company, and to require from members such information and explanations as he

considers necessary for the performance of his duties as an accounting officer.

(2)

The remuneration of an accounting officer shall be determined by agreement with

the close company.

[Ch4201s276]276. Duties of accounting officers

(1)

The accounting officer of a close company shall, not later than three months

after completion of the annual financial statements-

(a) subject to the provisions of section 272,

determine whether the annual financial statements are in agreement with the

accounting records of the close company;

(b) review the appropriateness of the

accounting policies represented to the accounting officer as having been

applied in the preparation of the annual financial statements; and

(c) report in respect of paragraphs (a)

and (b) to the members.

(2)

An accounting officer of a close company may be engaged by the company to keep

the company’s books and financial records and prepare its financial statements.

(3)

If during the performances of his duties an accounting officer becomes aware of

any contravention of a provision of this Act, he shall describe the nature of

such contravention in his report.

(4) Where

an accounting officer is a member or employee of the close company, or is a

firm of which a partner or employee is a member or employee of the close

company, or if the accounting officer has himself assisted in or had

responsibility for keeping the company’s books and financial records or

preparing its financial statements, his report shall state that fact.

(5)

If an accounting officer of a close company-

(a) at any time knows, or has reason to

believe, that the close company is not carrying on business or is not in

operation and has no intention of resuming operations in the foreseeable

future; or

(b) during the performance of his duties finds-

(i) that any change, during a relevant

financial year, in respect of any particulars mentioned in the constitution (or

in the absence of a constitution are required by this Act) has not been

registered,

(ii) that the annual financial statements

indicate that as at the end of the financial year concerned the close company’s

liabilities exceed its assets, or

(iii) that the annual financial statements

incorrectly indicate that as at the end of the financial year concerned the

assets of the close company exceed its liabilities, or has reason to believe

that such an incorrect indication is given,

he shall forthwith report in writing accordingly to the Registrar.

(6)

If an accounting officer of a close company has in accordance with subparagraph

(ii) or (iii) of paragraph (b) of subsection (5) reported to the

Registrar that-

(a) the annual financial statements of the

close company concerned indicate that as at the end of the financial year

concerned the company’s liabilities exceed its assets;

(b) the annual financial statements incorrectly

indicate that as at the end of the financial year concerned the assets of the

company exceed its liabilities;

(c) he has reason to believe that such an

incorrect indication is given, and he finds that any subsequent financial

statements of the company concerned indicate that the situation-

(i) has changed, or

(ii) has been rectified and that the assets

concerned then exceed the liabilities or that they no longer incorrectly

indicate that the assets exceed the liabilities; or

(d) he no longer has reason to believe that

such an incorrect indication is given, as the case may be, he may report to the

Registrar accordingly